ISLAMABAD: External debt of $ 81.606 billion in Economic Survey 2020-21 does not include foreign currency liabilities (foreign currency bonds, SWAPs), public sector corporate debt, banks, and private sector borrowing.
The State Bank of Pakistan (SBP), however, includes all of these elements to determine the total external debt liabilities at $ 116.309 billion by March 2021.
The survey noted that Pakistan’s total public debt was 38.6 trillion rupees at the end of March 2021, up from 36.399 billion rupees at the end of June 2020, registering an increase of 1.607 billion rupees in the first nine. month of the current fiscal year.
The increase of Rs 1.607 trillion in the first nine months of the current fiscal year was far less than an increase of Rs 2.499 trillion seen during the same period last year. The increase in total public debt during the first nine months of the current fiscal year has been less than the federal government’s borrowing of Rs 2,065 trillion to finance its budget deficit.
The deviation is mainly due to the appreciation of the rupee pak against the US dollar by around 9%, which resulted in a decline in the value of the external public debt when it is converted into rupee pak, added. investigation.
Pakistan experienced one of the smallest increases in public debt during the pandemic. The global public debt-to-GDP ratio increased by 13 percentage points from 84% in 2019 to 97% in 2020, while Pakistan’s debt-to-GDP ratio registered a minimum increase of 1.7 percentage points and s ‘stood at 87.6% at the end of June 2020 compared to 85.9% at the end of June 2019. Pakistan’s debt-to-GDP ratio is expected to decline and will remain below 84% by the end of the current fiscal year.
The Survey noted that public external debt stood at $ 81.6 billion at the end of March 2021, increasing by about $ 3.6 billion in the first nine months of the current fiscal year. The increase reveals that the debt from multilateral and bilateral sources has increased by $ 2.2 billion. This amount also includes $ 0.5 billion received from the IMF under the Extended Financing Facility (EFF). The stock of Pakistan Banao certificates and Naya Pakistan certificates recorded a cumulative increase of $ 0.4 billion.
Gross disbursements on external loans reached $ 7.724 billion in the first nine months of 2020-2021, including disbursements from multilateral sources which amounted to $ 3.397 billion and accounted for 44% of total disbursements. Bilateral sources contributed $ 1.207 billion or 16% of total disbursements. Deposits from China on this SAFE amounted to $ 1,000 million; and commercial loans contributed $ 3.120 billion, or 40% of total disbursements.
External public debt repayments reached $ 5.147 billion in the first nine months of the current fiscal year, compared to $ 5.537 billion in the same period last year. This reduction in reimbursements is mainly due to the initiative of the Debt Service Suspension Initiative (DSSI) and to the absence of reimbursement of Eurobonds / Sukuks during the current financial year. Interest payments reached $ 1.080 billion in the first nine months of the current fiscal year, compared to $ 1.580 billion in the same period last fiscal year.
Interest was recorded at 2,104 billion rupees in the first nine months of the current fiscal year against its annual budget estimate of 2,946 billion rupees. Domestic interest payments amounted to Rs 1,934 billion and made up about 92% of total interest service in the first nine months of the current fiscal year, mainly due to the higher volume of debt domestic in the total public debt portfolio. On an annual basis (2020-2021), the interest service is expected to remain below budgeted estimates, mainly due to the extension of the DSSI from January to June 2021, the appreciation of the pak rupee against the US dollar and the decline in interest payments due to national savings plans. due to withdrawals against abandoned price obligations.
In addition to the net inflows of external capital, the following factors influenced the evolution of the stock of external public debt during the first nine months of the current fiscal year: in US dollars, the revaluation loss due to the depreciation of the dollar US against other international currencies increased the stock of external public debt by about $ 1.1 billion. This increase is mainly due to the depreciation of the US dollar against the Chinese yuan by 8%, the euro by 5% and the Special Drawing Right (SDR) by 3%; the conversion loss due to the depreciation of the US dollar against other international currencies was more than offset by the appreciation of the pak rupee against the US dollar by 9 percent which led to the reduction in the value of the rupee from the external public debt.
Domestic debt was recorded at 25,552 billion rupees at the end of March 2021, registering an increase of 2,270 billion rupees in the first nine months of the current fiscal year.
Permanent debt represented 62% of the domestic debt portfolio and stood at Rs.15.882 billion at the end of March 2021, an increase of Rs.1852 billion in the first nine months of the current fiscal year. The bifurcation of this increase reveals that the net mobilization of the government through the issuance of GDP and GIS was Rs 1,488 billion and Rs 439 billion respectively, while a net pension amounting to Rs 74 billion was observed in Prize Bonds due to the discontinuation of Prize Bonds of various denominations.
Floating debt stood at Rs 6 trillion, or about 24% of the total domestic debt portfolio at the end of March 2021. In the first nine months of the current fiscal year, net mobilization through issuance of treasury bills was 421 billion rupees.
The stock of unfunded debt stood at Rs.3652 billion at end-March 2021, or about 14% of the total domestic debt portfolio. Unfunded debt recorded a net reduction of Rs 22 billion during the first nine months of the current fiscal year.
Misaligned economic policies of the past, including large budget deficits, loose monetary policy, and the defense of an overvalued exchange rate, have fueled consumption and short-term growth but have steadily eroded macroeconomic buffers, increased external debt , inflated the current account deficit and depleted international reserves, the poll maintained.
The external public debt / foreign exchange reserves ratio improved and stood at 4.1 times in 2019-20 against 5.1 times in the previous year, due to the slowdown in new accumulation debt and the increase in the country’s foreign exchange reserves.
The growth in external public debt service was mainly driven by the repayments of Eurobonds and commercial loans which exceeded the growth of FEE and, therefore, the ratio of external public debt service to revenue in currencies increased to 20.4% in 2019-20, from 17.2% in 2018-19.
As the balance of payments situation improves, external debt sustainability is expected to improve further in the future.
Pakistan entered the international capital market in April 2021 after a gap of more than three years by successfully raising $ 2.5 billion through a multi-tranche transaction of 5, 10 and 30 year Eurobonds .
Copyright Business Recorder, 2021